John Feehery: Speaking Engagements

Devil is in the Details

Posted on September 17, 2008

I am pretty sure that Warren Buffet is not losing any money in this deal.

You see, Buffet earns his money the old fashioned way.He invests in companies that he has heard of that do things that he needs and that make solid profits in unspectacular ways.

Buffet has made a lot of money doing things the old-fashioned way.

I doubt he would invest in “complex trading instruments”, whatever the hell they are.

Looking at the decline and fall of AIG, it is interesting to note that many of its business units are doing just fine.Its insurance business is making a healthy profit.But when it dabbled in “complex trading instruments”, it got hit very hard.And now taxpayers are on the hook for billions of dollars.

One other thing to note on this so-called bailout:The feds have driven a pretty hard bargain.They are charging very high interest rates for the money and, by the way, they are taking over most of the company.AIG could have gotten a better deal from their local loan shark, had their local loan shark had a hundred billion or so of cash hanging around.

The taxpayers should be concerned that they are putting so much of their money on the line for these bailouts, but at the end of the day, the government usually makes money on these deals.When we bailed out Chrysler, we made money.Same thing will probably be true with AIG.

The Democrats have been quick to blame the Bush Administration for its lack of oversight of the quick rise of “complex trading instruments.”But the fact of the matter is that many of these instruments were not in the jurisdiction of either the SEC or the various insurance commissioners.

Like the strange world of hedge funds, there is a big financial world out there that is largely unregulated. And in that world, there are a lot of crooks and a lot of con men.

The Bush Administration should have been more eager to investigate this world.But that is also true of the Democratic Congress, who resisted reforms of Fannie and Freddie, often looked the other way when it came to the world of hedge funds.

One of the largest hedge fund operators in the world is George Soros.Soros (who was convicted of fraud in France and who manipulated currency markets in Great Britain and Thailand) has been credited by many for buying the 2006 election for the Democrats.It was his seed money that paid for MoveOn.org.

It is unclear what role Soros played in this current capital crisis, if any, but you can bet your bottom dollar that the Democrats will never investigate him or the hedge fund industry.

John McCain is not somebody who understands “complex trading instruments”.But that is not unusual.Neither does Hank Paulson, or most of the other mandarins of Wall Street.Those who invested in them did so because they thought they could make a lot of money really fast, without understanding the full ramifications of their investments.

But you can bet your bottom dollar that McCain will eagerly go after those who perpetrated this enormous fraud on the American taxpayer.This kind of financial chicanery offends McCain’s sense of honor.You can sense that if McCain gets elected President, he will do everything he can to put the bad guys away.When McCain says he clean up Wall Street and Washington, he means it.